Mid-year inflation hits 4.1%

The rate of inflation in June was 0.3%, the same as in May, meaning that by the middle of this year, prices had risen by 4.1% compared with December 2004.

With prices expected to continue to rise at a similar pace under pressure from consumption, there is a real possibility that, even in the revised formula, the inflation target of 7.5% will be missed.

For next year, the Romanian authorities have already negotiated a relaxing of the inflation target with the International Monetary Fund to 6%. This could mean that the entire disinflation programme for the following years will be revised by 0.5-1 percent.

With inflation remaining at 0.3% in June, the annual growth in prices fell to 9.7% from the 10% seen in April and May. Annual inflation grew strongly in April amid the higher prices for utilities.

Average monthly inflation now stands at 0.7%, compared with 0.6% over the same period in 2004. In June of last year, inflation was 0.6%.

Inflation received a boost in June from the higher prices of services (which increased by 1 percent), and food (0.4%). Non-food products fell last month by 0.1%. Within this category, the most significant decrease (3.4%) was for natural gas prices, followed by power. In fact, services have seen stronger growth this year than commodities. Price increases hit a record high in February of 2.5%.